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Employee Share Ownership Plans – ESOP's new data from OEOC conference

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Employee Share Ownership Plans – ESOP's new data from OEOC conference

By , September 12, 2014

Whilst we await new changes to taxation law around ESOP’s in Australia, hopefully being implemented later in 2014, a recent review of ESOP performance and popularity in the USA suggests we should get the changes through as soon as possible and get on with it !

There are now over 10,500 ESOP’s in the USA ( 95 % in private businesses ) and approx 3,500 majority or wholly owned businesses (owned by the employees). The recent research strongly supports the improvement in performance which underpins the ESOP model we support, and which when used effectively can fund the profit share that “feeds” the plan and encourages employee engagement. The National Centre for Employee Ownership provides a summary of key academic studies on ESOP’s and corporate performance.

The studies highlight the performance impact over non-ESOP businesses:

Sales growth +2.4%

Employment growth +2.3 %

Productivity growth +14.8 %

Return on assets +5.5 %

Net profit margin +10.3 %

Wages 5 – 12 % higher

Total retirement assets 2.6 times greater

In fact their is very little, if any, negative academic research on ESOP’s and their effect on company performance.

 

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.